Pakistan’s achievements in the global arena demonstrate a country that has consistently sought to defend its sovereignty and assert its strategic position despite immense challenges.
The defining moment of national pride came with the successful defence of the homeland during the war with India, a struggle that not only safeguarded territorial integrity but also established resilience and determination of the people.
Victory on the battlefield created the foundation of a confident foreign policy that has evolved into a more mature, calculated, and pragmatic engagement with world powers in the last few months. Pakistan’s path of diplomacy has gradually shifted from defensive survival to active global participation, where it is no longer merely reacting to regional events but shaping them through strategic alliances and initiatives.
The engagement with China marked the first pillar of this transformation. Pakistan is an “all-weather friend”, driven by shared interests in economic connectivity, defence cooperation, and regional stability. Though the work on the China-Pakistan Economic Corridor (CPEC) is ongoing, Pakistan, China has further commitment to invest US$8.5 billion in this project during the Chinese President’s meeting with Prime Minister Shehbaz Sharif, which shows the importance of Pakistan for regional trade and connectivity.
At the same time, relations with Russia, once distant, are being steadily revived through military exercises, energy discussions, and diplomatic exchanges. These relationships broadened Pakistan’s foreign policy outlook, ensuring that it no longer relied on a single axis but diversified its alliances to secure long-term national interests.
The engagement with Middle Eastern states further emphasizes Pakistan’s new approach. Relations with Saudi Arabia have been cemented with the signing of a critical defence agreement that reaffirmed strategic trust and highlighted Pakistan’s role as a reliable partner in security cooperation.
Simultaneously, Pakistan worked to mend and strengthen ties with Turkey, the United Arab Emirates, and Qatar, recognizing that its diaspora and remittance inflows from the Gulf remain lifelines for its economy. These links were not only about economics but also about positioning Pakistan as a bridge between South Asia, the Middle East, and the Muslim world.
A careful diplomatic balancing extended to the United States under President Donald J. Trump, where Pakistan engaged Washington in constructive dialogue. Despite historical frictions, Pakistan demonstrated its ability to align on mutual concerns, especially counterterrorism and regional security.
The bilateral engagement went beyond rhetoric as Islamabad displayed itself as a credible actor capable of facilitating peace efforts in Afghanistan and contributing to stability in a turbulent region. The pragmatic relationship-building was visible when Pakistan, alongside other Muslim and Arab countries, became part of the peace initiatives concerning Israel-Hamas conflict.
With issuance of joint statements with foreign ministers of the Islamic world and aligning with President Trump’s 20-point proposal for peace in Gaza, Pakistan has projected itself as a responsible international actor advocating peace and stability and simultaneously enhancing its diplomatic capital.
The current foreign policy direction highlights Pakistan’s rise as a serious player in the global order. By maintaining constructive ties with the United States, strengthening strategic alignment with China, reviving its relations with Russia, and reinforcing bonds with the Middle East, including Turkey and Egypt, Pakistan has placed itself at the crossroads of multiple power centers. The result is recognition of Pakistan as a state with growing importance in shaping dialogue on peace, security, and economic cooperation.
Foreign policy achievements, however, are fundamentally tied to the economic outlook of the country. Though diplomatic relations have been established and deepened with multiple powers, translation of these political achievements into economic dividends has remained uneven.
Pakistan has yet to fully capitalize on the strategic goodwill it enjoys in the form of sustainable foreign direct investment, long-term trade partnerships, and technology transfers. The challenge lies not in the availability of opportunities but in the country’s internal governance, fiscal mismanagement, and regulatory challenges that often shy away potential foreign investors.
The economic picture reveals both resilience and fragility. Pakistan remains under an IMF programme worth US$7 billion under the Extended Fund Facility while simultaneously engaging with the Resilience and Sustainability Facility. IMF’s latest review meetings underline the urgency of fiscal reforms, particularly streamlining the National Finance Commission process, addressing trade-based money laundering, improving risk-based supervision, and expanding the scope of beneficial ownership registries.
The technical discussions with IMF highlight external stakeholders’ concerns regarding transparency, fiscal discipline, and anti-money laundering frameworks. IMF also placed emphasis on strengthening procurement systems, audit reviews, and improved oversight to ensure alignment with international standards.
Floods during the recent years tested Pakistan’s economic resilience, yet the IMF’s assessment that GDP growth could remain around 4% despite Rs. 360 billion in damages provides a measure of optimism. Agricultural resilience, particularly higher-than-expected sowing of rice and sugarcane, mitigated losses, while limited impacts on imports and revenues suggest that the economy has some buffers against external shocks. However, underlying vulnerabilities remain.
The Federal Board of Revenue continues to struggle with tax collection targets, compliance remains weak, and deadlines for digitized tax transmission have been repeatedly extended, demonstrating systemic challenges. Governance and corruption diagnostic report, long delayed, reflects the persistent challenge of weak institutions and administrative loopholes.
IMF’s push for greater health and education spending highlights another area where Pakistan underperforms despite repeated commitments. Fiscal decentralization, provincial spending priorities, and structural weaknesses of the National Finance Commission (NFC) award continue to complicate resource allocation undermining development outcomes.
Systemic flaws not only affect the state’s ability to attract investments but also erode confidence of international partners who demand accountability and rule of law as prerequisites for deeper economic engagement.
Foreign policy successes thus far create an enabling environment for economic opportunities, but the conversion of goodwill into investment requires a comprehensive domestic reform agenda.
Pakistan must actively design lucrative schemes for investors from the United States, China, Russia, and Middle Eastern countries. These could include tax incentives for foreign enterprises, special economic zones tailored for technology and renewable energy, and public-private partnerships in infrastructure development.
Special Investment Facilitation Council (SIFC), already tasked with streamlining investment processes, must be further empowered with legal authority to cut through bureaucratic inertia. Regulatory rationalization is essential, as overlapping jurisdictions, inconsistent policy signals, and arbitrary taxation remain major deterrents to serious investors.
Creation of an investor-friendly climate also demands strengthening of contract enforcement, judicial reforms to expedite commercial disputes, and establishment of independent regulatory bodies that operate transparently. Credibility of Pakistan’s institutions must be enhanced to ensure that investors view the country not merely as a short-term profit destination but as a sustainable partner.
Similarly, Pakistan must diversify its economic growth by exploring new revenue sources, such as expanding the IT export sector, investing in renewable energy projects, and enhancing regional trade through connectivity initiatives that position it as a transit hub between Central Asia, South Asia, and the Middle East.
Governance reform, particularly in fiscal management, is important. The government must establish the same diplomatic energy domestically as it shows internationally by addressing structural deficits, broadening tax base, curbing leakages, and ensuring transparent spending. Addressing the concerns related to NFC award, reforming FBR, and prioritizing health and education spending are critical steps for ensuring inclusive growth.
The way forward for Pakistan lies in integrating its foreign policy gains with its economic strategies. The government must capitalize on its geostrategic importance and establish goodwill with global powers to attract investment, generate employment, and foster innovation.
Offering lucrative and well-structured investment schemes, strengthening SIFC, improving regulatory environment, and decisive action against corruption are essential steps for success.
Pakistan must also seek new avenues for growth, particularly in agricultural technology, digital services, and renewable energy, while maintaining fiscal discipline and transparency. Integration of foreign policy maturity with economic governance reform will allow Pakistan not only to stabilize but also to rise as a formidable economic and diplomatic power in the years ahead.
Copyright Business Recorder, 2025
The writer is a lawyer and author, is an Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE)
The writer, an Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws
The writer is a corporate lawyer based in the US with extensive expertise in financial regulations, including Virtual Asset Service Providers (VASPs), corporate governance, and global economic policies. He holds an LLM from Washington University in St. Louis and has completed the Management Development Program at the Wharton School. He has developed regulatory frameworks for North American and South American Financial Institutions and has consulted and trained bureaucrats of different regions. He can be reached at abdulrauff@hotmail.com